From Q3 2021, Nigerian fintechs without defined regulations must undergo incubation before operating

by | Jun 18, 2021

Nigeria’s Securities and Exchange Commission (SEC) has hinted at a new requirement for financial technology businesses in the country. Starting Q3 2021, fintech platforms with no defined framework will have to go through an incubation program to legitimately operate. 

Called the Regulatory Incubator (RI) program, the Commission explained in a statement released on June 16, 2021, that it introduced the program to allow fintechs with new business models and processes to properly fit into existing regulations.

This will include both startups already operating and those still looking to enter into the fintech sector. The regulator adds that it is constantly looking for ways to accommodate innovation without ‘compromising market integrity and stay within limits that ensure investor protection.’

Once the program kicks off in Q3 2021, financial businesses running on full or auxiliary technology in the country will have to fill a Fintech Initial Assessment (FIA) form to determine if they are excluded from the process.


In the situation where the said innovation doesn’t have an existing regulatory framework, the startup will proceed to apply for the RI program.

Based on SEC’s terms, the application will either be accepted or rejected on the basis of whether the innovation is allowed or not.

Ten months into the incubation program, the startup will be presented with guidelines covering its services. This is to help it gain clarity on the appropriate regulatory regime applicable to it.

On completion of the 12-month program, the startup is either directed to continue operating as a registered entity or terminate its operations. 

It can only be imagined how far reaching the effect of this intended move will have on fintech startups as a number of innovations in the country’s fintech sector are still trying to find a fit within the existing regulations governing the financial sector. 

A possible implication is that API fintech startups, micro-lending platforms, investment tech, and other innovations operating under no specific regulatory framework may have to cease operation until certified through the incubation program.

Already, there are existing CBN guidelines covering mobile money operators, e-payment channels, USSD services, international money transfer, remittance and similar services. As it were, crowdfunding startups barely escaped this new directive as a framework was recently enforced in May.  

Crypto and digital commodity investment startups, on the other hand, may not make it through the FIA stage since their services are still restricted.


If anything, this can be explained as another case of regulations chasing after innovation. Still, it is unclear when regulations begin to stifle innovation, even as fintechs have been helping boost financial inclusion on the continent.

It is also not clear how this incubation program is different from the Central Bank of Nigeria’s regulatory sandbox — a platform that allows fintech companies to test their products and get regulatory approval before launching. 

A major drawback to the CBN’s sandbox could be a distrust for regulators among most startup founders. 

The SEC’s incubation program, however, has the added incentive of legitimacy, but the Commission has not revealed how it plans to enforce it. 

Oluwanifemi Kolawole
Oluwanifemi Kolawole

Human enthusiast | Writer | Senior reporter | Podcaster.

On January 22, 2022, be part of the largest gathering of innovators, startup founders, thinkers, programmers, policymakers, and investors in West Africa. Register free.

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7 months ago

I think you guys are painting a pig in white color in Hope that it would not stain it.

Call this sham what it is, any innovators nightmare because all of these increasingly become reasons to limit the innovations and innovators we desperately need to take this country to the next level.

We all know what always become of Nigerian regulations – it’s almost always politicized and turns out killing all it was meant to protect or incubate in this case.
Possibly another Avenue for revenue generation for another target driven Nigerian organisation.


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